Bandwidth/Napster Flashback, TuneCore Future

28Aug09

Who would have thought you could travel back in time to the moment when everything changed but there they were, the pioneers of the digital music industry on stage – Gerry Kearby, Liquid Audio, Hank Barry, Napster, Ken Wirt, Diamond Multimedia Rio, Gene Hoffman, eMusic, and Ted Cohen, EMI laughing over what happened that paved the path for Apple’s dominance today. Timing is everything and perhaps the lesson here is that sometimes being first out of the gate is simply being too early:

– 1996, Liquid Audio launches MP3 player, MP3.com founded, music industry $15B
– 1998, Rio portable MP3 player ships, RIAA loses fight to stop it, DMCA is enacted, eMusic founded
– 1999 Napster is created by Shawn Fanning
– 2000, eMusic launches first digital music subscription service
– 2001, Napster 26.4mm users, shutdown, relaunched as pay service
– 2002, Microsoft buys Liquid Audio’s patents for $7M
– 2003, Labels give Apple license to sell MP3s, Apple at 3% of market
– 2009, Apple world domination, MP3 is a standard, DRM is gone, audio bandwidth is plentiful, music no longer a product but a bundled service with celebrity access, merchandise and entertainment content, music industry a third the size of what it had been, now at $5B, Spotify not the last great service

Today, Gerry Kearby is on a crusade to save hearing with his new company Neurotone.  “Earbuds are causing significant hearing loss.  Ears can only recover if given a rest up to 45 minutes so never listen longer without a 15 minute break.”  Gene Hoffman is building online revenue with back-end support for WOW, etc. with his new venture Vindicia. Ken Wirt heads up Consumer Marketing at Cisco.  And Hank Barry is at Howard Rice representing Amazon (AVOD, Kindle).

It was a great session with many gems shared:   Gerry Kearby advising startups to be wary of VCs, investors require a liquidity event (e.g. IPO) in 3-5 years.  Hank Barry recommending:  ihearditon.com, ilistentoeverything.com.   Stephanie Ma of Cisco was on hand to capture some of the discussion with a Flip and expects to post soon at http://blogs.cisco.com/consumer.

MONETIZING DISTRIBUTION
Next up was Jeff Price who launched TuneCore in 2006 with its revolutionary pay for distribution model.  For a small payment of $9.99 a single (close to the  $10.50 an artist can earn on 15 singles sold on iTunes), an artist gains worldwide distribution with the largest distributor of music on the planet. Pay once, keep all the royalties.  TuneCore is enabling middle class musicians to make money with their music, over half a million songs delivered to the long tail, over $52mm earned in music sales the last 24 months by TuneCore artists.  Established brands use TuneCore as well:  Cheap Trick, Aretha Franklin.  But what makes TuneCore such an exciting story to tell are the eye-popping deals recently signed with UMG, House of Blues, Guitar Center, that is making TuneCore the place for bands to be heard.
– Sell 100 songs of iTunes within 30 days and get guaranteed gigs with minimum $100 payment to the band at the Roxy LA or Le Poisson Rouge NYC
– Sell 250 songs on iTunes within 180 days to zipcodes within a 20 mile radius of a House of Blues venue, and get a guaranteed gig at that HOB with a minimum payment of $100 paid to the band
– Sell 25,000 in 90 days and get at least one song professionally scored, translated to sheet music and made available for sale via paid download at musicnotes.com earning money on each sale.   Musicnotes.com has sold over 5mm sheet music downloads since inception in 2000 at an average price of $4.95
– Sell 100,000 songs and get free Ernie Ball Guitar Strings and receive a “Silver” sales certification award from TuneCore
– Sell 250,000 songs and receive a “Gold” sales certification award from TuneCore
– Sell 500,000 songs and receive a “Platinum” sales certification award from TuneCore
– Top Ten bestsellers have their physical CDs racked and made available for sale at Guitar Centers across the US

Additionally, TuneCore has been successful is securing 13-16 featured iTunes singles of the week and about 1000 similar marketing and promotion coups for its artists.  The UMG deal will provide artists with exposure to the UMG labels.  TuneCore also sells posters, buttons, stickers, tee shirts, analytics, and post production mastering for a fee. An interesting point was made regarding TuneCore not registering UPCs with Nielsen’s Soundscan, although artists may do so individually.  This means the Soundscan numbers which used to be used for leverage to get retail shelf space or a MTV spot are no longer accurate and no longer the delineator of success in the industry.  A frequent criticism of Nielsen these days in video as well.  Guitar Center has an equity interest in TuneCore and VC investors include Opus which invested $7mm 10 months ago.

BAND TO FAN ENGAGEMENT
WITH DJ SHADOW, BEASTIE BOYS, PEARL JAM

Recognizing audience to be as stellar as the speakers, Ted Cohen acted as roving mike as we all chowed down on the comfy green sofa lounges in the Main Hall, behind me was the founder of Rhapsody, and over there was Chuck Fishman of fONKSQUISh.  It was a nice segue into the afternoon, when next on stage were Mike Fiebach, DJShadow.com, Lee Martin, Silva Artist Management, Tim Bierman, Pearl Jam’s Ten Club, and Scott Perry, NewMusicTipsheet. Lee told of how as a fan he volunteered to design a website and got hired on as a result.  Today, Lee works on the social media marketing campaigns as well as jacket and merchandise designs for Beastie Boys, Beck, FooFighters..  He said some artists are very involved like Beck who would love to upload 70 new pieces of content a week, and then there are those like the Beastie Boys who just don’t tweet.  “When selling legends, its ok if they don’t want to say anything.”  DJ Shadow also likes to stay behind the curtain which lends to his mystery. And Pearl Jam won’t go near FB eventhough FB is visited by fans 20x more than MySpace and 10x more than Twitter.  DJ Shadow really enjoys creating street teams out of die hard fans, giving them tee shirts and incentives to spread the word.  There is a lot of pride behind money generated from fans vs. sponsor deals. Pearl Jam still does online listening parties although value is questioned, with audiojacking where anything streamed on your computer can be ripped important to do close to the release like the day before.  Lee added, “If an album doesn’t leak, then it’s a problem, at least people care if its at the top of the pirated list, there is a correlation between the more it leaks, the more it sells.”  The campaign for Them Crooked Vultures (super group of FooFighters, Zeppelin..) has been based on mystery and leaks…”and momentum has been building to a frenzy” called out an audience member – wOOt!

AND SO MUCH MORE
There was still so much more ahead when I had to go.  Livia Tortella of Atlantic Records, Stephen White, Gracenote, Ben Kline of INGrooves, Geoff Ralston of Lala, Steve Grady of RoyaltyShare, the list goes on.  Kudos to Ashli Lewis and gang for two fantastically creative, entertaining and informative days of Bandwidth!  Looking forward to the next one.

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One Response to “Bandwidth/Napster Flashback, TuneCore Future”

  1. We’ve come a long way, it’s true! I was at eMusic when Gene Hoffman came up with the idea of “EMusic Unlimited” (that was the capitalization at the time), and we worked on it together. It was revolutionary, even as the market ultimately swung back to the a-la-carte model. Crazy times.

    And the crazy times are still upon us. Maybe this industry is out of its infancy, but it’s still in diapers. 🙂

    –Peter
    peter@tunecore.com


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